It happened in 1967 with the introduction of the world’s first mechanical cash machine. It also happened in 1972 with the introduction of the networked ‘Cashpoint’ – the first ATM as we know them today. Whenever there is a fundamental shift in the way people are able to access and interact with their money there has been an initial hesitancy, even wariness. However, the automated teller and the magnetic strip have gone on to become shining examples of how technology has revolutionised consumer behaviour in banking and payments. As we move into 2014, it is clear that the evolution of mobile services will prove to be every bit as important.
The mobile payments marketplace has exploded in recent years and competition to win consumer attention is fierce. Fresh young start ups are promoting new and innovative offerings, while established players seek to leverage their market heritage and brand recognition. This overcrowded and fragmented space has doubtless played a major role in hindering widespread consumer adoption of mobile payments to date. With no universal solution on offer, consumers must battle to navigate a confusing array of user interfaces and experiences. This jars with the main attraction of mobile payment technology for consumers – convenience. A recent VocaLink survey into mobile usage and behaviour revealed that ‘speed’ (66%) and ‘saving time (60%) are listed as the major perceived benefits of mobile payments, with ‘ease of use’ in third place at 41%.
However, with mobile technology and smartphones cemented firmly at the centre of our daily lives, it follows that if presented with the right solution, consumers would welcome mobile payments with open arms. We use our smartphones for entertainment, organisation, personal fitness – the lure of the convenience of accessing money on the move is evidenced by the 27% consumers who already use mobile banking. Widespread smartphone ownership and familiarity with mobile banking is paving the way for consumer acceptance of and interest in mobile payment solutions. The research reveals that half of Britons are either already using mobile payments (20%) or are interested in doing so (30%).
Despite a raft of negative headlines over the last few years, it is clear from the research that banks still enjoy resilient consumer trust – 35% of respondents said they would be more likely to pay for items using their mobile phone if the service was provided by their banks. This figure leaps to 60% amongst those who already use a mobile device to make payments.
Consumer acceptance and readiness will soon turn to demand – a demand which banks cannot afford to ignore if they are to keep pace with new market entrants. The introduction of the Vickers Report account switching regulation in September will also force banks to consider how they differentiate from established competitors. With consumers placing ever more emphasis on easy to use mobile services, banks must reassess their offerings in this field if they are to attract and hold customer attention.
Consumer readiness is a key factor driving banks towards mobile payments. However, the benefits from the provision of this service do not lie only with the customer. 30% consumers said they would interact with their bank more if they provided a mobile payment service. Banks cannot afford to pass up this opportunity for increased customer interaction and engagement, which in turn leads to opportunity to cross sell products and offerings. The rich cross-channel data that can be gleaned from consumer interaction across platforms and outlets will also provide banks with an invaluable insight into their customer base, helping to drive further revenue with tailored and personalised services.
The industry has been discussing mobile payments for several years, though it seems we have now reached a critical tipping point for widespread adoption – the consumer appetite is there, but will banks take the bait?
By Paul Stoddart,Managing Director, Strategy and Business Development, VocaLink
About the author:
Paul joined VocaLink as Managing Director, Strategy & Business Development in June 2012. He is responsible for Corporate Strategy, M&A, Product Development and Marketing.
Paul’s previous role was at Barclays Bank, where he was responsible for M&A and Asset Disposals for Barclaycard globally for 4 years.
Prior to this Paul spent 12 years at RBS Group where he held a variety of senior roles across Group Corporate Development, Internet banking and E-commerce, Global Transaction Services and WorldPay.
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